Several Western states have renewable portfolio standard (RPS) requirements that have
driven significant expansion of wind, solar, and geothermal power. This study examines
the renewable energy resources likely to remain undeveloped in the West by the time all
these requirements have culminated in 2025. Development beyond that point will likely
depend on the best of these remaining resources—where they are located, what it takes to
get them to market, and how cost effectively they fit into a diverse portfolio of electric
generation technologies.

While the bulk of this study concerns future renewable energy supply, its aim is to reduce
some of the present uncertainty that complicates long-term planning. These findings
about the renewable resources likely to be available in 2025 can inform today’s
discussions about policies targeting future development—policies that might be different
from the RPS model. Many important factors outside the scope of this study are likely to
affect what those policies are. The aim here is not to recommend a path, but to assess the
supply conditions that—with many other factors—might affect future state policies and
utility business decisions.

So far, most western utilities have relied primarily on renewable resources located close
to the customers being served. This appears to be enough to keep most states on track to
meet their final RPS requirements. What happens next depends on several factors that are
difficult to predict at this point in time. These factors include trends in the supply and
price of natural gas, greenhouse gas and other environmental regulations, changing
consumer preferences, technological breakthroughs, and future public policies and
regulations. Changes in any one of these factors could make future renewable energy
options more or less attractive.

Nevertheless, it is possible to characterize the stock of renewable resources likely to
remain undeveloped after RPS requirements are met, and to do so with a reasonably high
degree of confidence. That is the purpose of this report. While the study does not by itself
answer questions about where future energy supplies should come from, it does reduce
some of the uncertainty about one type of alternative: utility-scale renewables developed
for a regional market.

This study divides the timeline of renewable energy development into two periods: the
time covered by state RPS policies as they exist today, and what may be termed “next
generation” renewable energy policies. In the West, the last state RPS culminates in
2025, so the analysis uses 2025 as a transition point, as illustrated in Figure ES-1. Nextgeneration policies may be simple extensions of existing RPS mandates, or innovative tools specifically designed to address new conditions in the electric sector.

“Value proposition” means there is reasoned justification for believing that a corresponding investment in infrastructure would be responsive to a foreseeable demand
if it were built. The stronger the potential value, the more likely it would be that
renewable resource developers would compete for that future opportunity. In some cases,
realizing a value proposition could depend on regional cooperation for new transmission.

A number of corridors with positive value propositions stand out. They generally cluster
around two destination markets: California and the Southwest; and the Pacific Northwest.
Most involve deliveries of wind power, but in some circumstances solar and geothermal
power may offer targeted opportunities for value.

Wyoming and New Mexico could be areas of robust competition among wind projects
aiming to serve California and the Southwest. Both states are likely to have large
amounts of untapped, developable, prime-quality wind potential after 2025. Wyoming’s
surplus will probably have the advantage of somewhat higher productivity per dollar of
capital invested in generation capacity; New Mexico’s will have the advantage of being
somewhat closer to the California and Arizona markets.

Montana and Wyoming could emerge as attractive areas for wind developers competing
to meet demand in the Pacific Northwest. The challenge for Montana wind power appears
to be the cost of transmission through the rugged forests that dominate the western part of
the state. Wyoming wind power could also be a low-cost option for Utah. This could complement Utah’s own diverse portfolio of in-state resources.

Colorado is a major demand center in the Rocky Mountain West and will likely have a
surplus of prime-quality wind potential in 2025. However, the results suggests that
especially high transmission costs could be a formidable economic obstacle to future
renewable energy trading between Colorado and its Rocky Mountain neighbors.

California, Arizona, and Nevada are likely to have surpluses of prime-quality solar
resources. None is likely to have a strong comparative advantage within the three-state
market, unless environmental or other siting challenges limit in-state development. Of the
three, California is the most economically attractive destination market, as indicated by
the competitive benchmark used in this study. Development of utility-scale solar will
probably continue to be driven by local needs rather than export potential.

New geothermal development could trend toward Idaho by 2025. Much of Nevada’s
known geothermal resource potential has already been developed, but to date very little
of Idaho’s has. Geothermal power from Idaho could be competitive in California as well
as in the Pacific Northwest, but the quantity is relatively small. Reaching California,
Oregon, and Washington may depend on access to unused capacity on existing
transmission lines, or on being part of a multi-resource portfolio carried across new lines.

The analysis begins with a detailed state-by-state examination of renewable energy
demand and supply projected out to 2025. The purpose of the state analyses is to forecast
where the largest surpluses of the most productive renewable resources are likely to be
after all current RPS policies in the West culminate. Table ES-1 summarizes the findings.

This report relies on updates to the wide-area renewable energy resource assessment
conducted under the Western Renewable Energy Zone (WREZ) Initiative for the Western
Governors’ Association. The purpose of the WREZ assessment was to locate the West’s
most productive utility-scale renewable energy resource areas—zones where installed
generation would produce the most electricity for each dollar invested.1 The assessment
took into account the quality of natural factors, such as windiness and annual sunshine, as
well as limiting factors, such as national parks, wilderness areas, and terrain that was too
rugged for development.2 Prime-quality renewable resources are a subset of the screened
WREZ resources.

Four assumptions guide forecasts of the prime resources likely to remain untapped by
2025:

• Utilities will prefer using in-state prime resources to meet their RPS requirements

• Prime out-of-state resources will not be preferred unless there are no more prime
in-state resources

• Only surplus prime resources will have a meaningful place in a regional post­
2025 market

• Utilities will prefer a diversity of resource types in their RPS compliance
portfolios.

These assumptions are consistent with feedback from utility planners and regulators
obtained as part of the WREZ Initiative.

While the WREZ analysis is the most comprehensive renewable energy assessment
conducted for the western United States to date, there are some shortcomings that have a
potential effect on the assumptions underlying this analysis. Resources that might be
good enough for local use but are unlikely to be competitive in a regional market were
not screened and quantified with the same rigor as were higher quality resources because
they were outside the scope of the WREZ analysis. Unique characteristics and a short
interconnection distance could make an isolated non-WREZ site unusually productive,
even if there was no evidence of systematic quality across the larger area. A large number
of such undetected areas could result in underestimating the nearby supplies capable of meeting post-2025 demand economically. It could also lead to underestimating the prime
resources likely to remain undeveloped by 2025.

Another caveat is that small-scale renewable DG is outside the scope of this particular
study. This does not diminish the importance of DG as a long-term resource. Rather, it
recognizes that DG and utility-scale renewables face different issues of comparable
complexity and are best analyzed on their own merits separately. DG and the
development of utility-scale prime renewable resources are not mutually exclusive;
nevertheless, aggressive state DG policies could reduce demand for new utility-scale
generation resources of any type, which in turn could reduce demand for prime
renewables developed regionally.

The study then moves from the state resource analyses to examine the value of delivering
the region’s best surplus resources to the West’s largest demand centers. The test for
competitiveness is the difference between the delivered cost of the best 1,000 GWh of
prime renewable resources likely to remain undeveloped in 2025 and a cost benchmark
for the destination market. The benchmark is based on the projected future cost of a new
combined-cycle natural gas turbine (CCGT) built in the destination market, with natural
gas in 2025 at a nominal price of between $7.50/mmBtu and $8.43/mmBtu. In the case of
wind and solar power, we adjust the benchmark to account for how well electrical
production from the renewable resource matches load in the destination market hour to
hour.

The study does not make an assumption about future federal or state renewable energy
policies past their current expiration or target dates. Cost estimates do not include the
production tax credit (PTC) or the investment tax credit (ITC). One aim of this analysis is
to provide a baseline picture of the renewable energy market in 2025 before adding in the
effect of future policies, whatever they might be. A plausible baseline can provide
important input for designing future state and federal policies.

Drawing on earlier work, this study assumes the following cost changes from 2012 to
2025:

• Wind power: All-in costs will decrease 19% on a constant-dollar basis and will
increase 9% in nominal dollars

• Solar power: All-in costs will decrease 35% on a constant-dollar basis and will
decrease 5% in nominal dollars

• Geothermal power: All-in costs will decrease 9% on a constant-dollar basis and
will increase 19% in nominal dollars

• CCGT (benchmark value): All-in costs will remain unchanged on a constantdollar basis and will increase 29% in nominal dollars; the nominal price of natural
gas for electric generation will range from $7.50 per mmBtu to $8.40 per mmBtu
at major trading hubs in 2025.

As explained below, the study applies a sensitivity analysis to test the robustness of its
conclusions if future costs differ from these estimates.

Significant technological breakthroughs or other developments could have implications
for the assumptions about renewable resource availability and effective per-megawatt­
hour cost. For wind power, technological breakthroughs in turbines designed for
moderate wind speeds could improve the productivity of sites that are less productive
using current technologies. This could reduce the cost differential between remote primequality wind resources and local wind resources of moderate quality. Much of this
improvement has already taken place and is captured in the cost estimates used for this
study, but additional improvements are possible.

Estimates for geothermal power account for advancements in engineered geothermal
systems (EGS). Pilot projects suggest that including an EGS component in new
infrastructure at sites with known geothermal potential could increase productivity by
25% and could reduce total costs (on a per-megawatt-hour basis) by 2%.4 In this study,
these adjustments to quantity and cost are applied to known geothermal potential that had
not yet been developed as of 2013.

Excluded from the analysis is a large amount of geothermal potential currently
categorized as “undiscovered.” Its existence is inferred from statistical models of the
spatial correlation of geologic factors that are indicative of geothermal systems, but its
specific location is unknown. If more undiscovered resources can be located, the amount
of developable geothermal potential incorporated into long-term regional planning could
increase. Predicting the quantity is infeasible at this point because of insufficient data and
the lack of a sound forecasting methodology. For the purposes of this study, we assume
that the unknown increase in discovered geothermal resources will mostly offset the
unknown decrease in future geothermal potential that may be due to some sites with
known potential not being developed.

The analysis assumes that the shape of hourly load profiles in destination markets will not
change appreciably between 2012 and 2025. The valuation methodology gives greater
economic weight to power delivered on peak, and this adds to the value of solar power. If
actual profiles were to trend flatter—that is, future midday load peaks are less
pronounced than they are today—solar resources would have a smaller time-of-delivery value adder. Similarly, one case study indicates that solar power’s capacity value (i.e., the
value of its ability to deliver power at peak times) diminishes at higher penetration rates,
although the trend is significantly less for concentrating solar power with thermal
storage.

We include a new approach to estimating future transmission and integration costs,
noting, however, that future transmission costs and grid integration costs are difficult to
forecast with precision. This study tests whether the difference between current delivered
cost and the benchmark is large enough to accommodate a hypothetical doubling of
current transmission costs.6 Figure ES-2 illustrates the “two times tariff” approach. A
renewable energy zone is treated as having a high potential for value in 2025 if its busbar
cost plus double the current transmission charges is less than the benchmark in the
destination market.

By basing the methodology on current tariff rates rather than generic cost-per-mile line
costs, the analysis accounts for how transmission costs can vary from one area to another.

A transmission line of the same size is generally more expensive to build if the route
includes mountains and forests, as compared to a route across plains. Juxtaposing
estimates from this new approach with more conventional estimates can provide an
additional data point for understanding the uncertainty surrounding future transmission
costs. In most cases the “two times tariff” approach results in delivered cost estimates
that are higher than those suggested by costs of new transmission projects that have been
proposed along the same resource-to-market path, indicating that the methodology is
appropriately conservative.

Table ES-1 ranks the 15 resource-to-market combinations that scored highest in the
evaluation methodology used in this study:

Long-term trends in capital costs are difficult to predict, so this study included a
sensitivity analysis to test how a 10% change in a technology’s assumed 2025 cost would
affect its relative competitiveness as estimated in this study.

The most pronounced cost sensitivity was for utility-scale solar power from Nevada and
Arizona delivered to California. If costs were to fall 10% below the base-case
assumptions used in this analysis, solar power from Nevada and Arizona would be close
to parity with CCGT in California. The two resource paths would rank third and fourth
among the potential paths with the greatest likelihood for value in a post-2025 West. A
cost decrease would also favor California’s own solar resources, however, so the net
impact on imports would probably be related to siting constraints.

Results for wind power did not change significantly under different cost assumptions.
Wyoming wind delivered to Utah and California remained below or close to parity with
natural gas. Other wind resource paths were slightly less competitive.

Paths for geothermal power were sensitive to cost changes. The reduced-cost scenario
brought Idaho geothermal to within 10% of competitiveness with natural gas in
California. Higher costs, on the other hand, could put geothermal power 30% to 85%
above the forecasted cost of a new CCGT in 2025.

Results from this study suggest that geothermal power will likely remain more costly on
an all-in, per-MWh basis than equivalent CCGT or other renewable power options in the
West out to 2025, barring a significant breakthrough in current technology cost or
performance. For wind and solar built in ideal locations, the gap could become small.

Table ES-2 frames the results of the sensitivity analysis in the context of a renewable
resource’s competitiveness, which is defined and measured here as the difference
between the resource’s levelized delivered cost without subsidy and the levelized cost of
a CCGT built in 2025 in the destination market.

• Wind power: Wyoming and New Mexico to California and Arizona; Montana and
Wyoming to Oregon and Washington; Montana to California.

Figure ES-3 compares the relative economic competitiveness in California of six
renewable resource options, as estimated in this analysis. For each option shown on the
chart, empirical evidence exists suggesting that large surpluses will be available in 2025.

Most are likely to be close to the cost of a new CCGT, even if their busbar costs turn out
to be 10% higher than the baseline estimates used in this analysis. The results suggest
that, once the state achieves its current RPS goal in 2020, looking regionally for
additional renewable energy supplies could provide California with reasonable diversity
at reasonable cost.

Review of OIL IN THEIR BLOOD, The American Decades by Mark S. Friedman

OIL IN THEIR BLOOD, The American Decades, the second volume of Herman K. Trabish’s retelling of oil’s history in fiction, picks up where the first book in the series, OIL IN THEIR BLOOD, The Story of Our Addiction, left off. The new book is an engrossing, informative and entertaining tale of the Roaring 20s, World War II and the Cold War. You don’t have to know anything about the first historical fiction’s adventures set between the Civil War, when oil became a major commodity, and World War I, when it became a vital commodity, to enjoy this new chronicle of the U.S. emergence as a world superpower and a world oil power.

As the new book opens, Lefash, a minor character in the first book, witnesses the role Big Oil played in designing the post-Great War world at the Paris Peace Conference of 1919. Unjustly implicated in a murder perpetrated by Big Oil agents, LeFash takes the name Livingstone and flees to the U.S. to clear himself. Livingstone’s quest leads him through Babe Ruth’s New York City and Al Capone’s Chicago into oil boom Oklahoma. Stymied by oil and circumstance, Livingstone marries, has a son and eventually, surprisingly, resolves his grievances with the murderer and with oil.

In the new novel’s second episode the oil-and-auto-industry dynasty from the first book re-emerges in the charismatic person of Victoria Wade Bridger, “the woman everybody loved.” Victoria meets Saudi dynasty founder Ibn Saud, spies for the State Department in the Vichy embassy in Washington, D.C., and – for profound and moving personal reasons – accepts a mission into the heart of Nazi-occupied Eastern Europe. Underlying all Victoria’s travels is the struggle between the allies and axis for control of the crucial oil resources that drove World War II.

As the Cold War begins, the novel’s third episode recounts the historic 1951 moment when Britain’s MI-6 handed off its operations in Iran to the CIA, marking the end to Britain’s dark manipulations and the beginning of the same work by the CIA. But in Trabish’s telling, the covert overthrow of Mossadeq in favor of the ill-fated Shah becomes a compelling romance and a melodramatic homage to the iconic “Casablanca” of Bogart and Bergman.

Monty Livingstone, veteran of an oil field youth, European WWII combat and a star-crossed post-war Berlin affair with a Russian female soldier, comes to 1951 Iran working for a U.S. oil company. He re-encounters his lost Russian love, now a Soviet agent helping prop up Mossadeq and extend Mother Russia’s Iranian oil ambitions. The reunited lovers are caught in a web of political, religious and Cold War forces until oil and power merge to restore the Shah to his future fate. The romance ends satisfyingly, America and the Soviet Union are the only forces left on the world stage and ambiguity is resolved with the answer so many of Trabish’s characters ultimately turn to: Oil.

Commenting on a recent National Petroleum Council report calling for government subsidies of the fossil fuels industries, a distinguished scholar said, “It appears that the whole report buys these dubious arguments that the consumer of energy is somehow stupid about energy…” Trabish’s great and important accomplishment is that you cannot read his emotionally engaging and informative tall tales and remain that stupid energy consumer. With our world rushing headlong toward Peak Oil and epic climate change, the OIL IN THEIR BLOOD series is a timely service as well as a consummate literary performance.

Review of OIL IN THEIR BLOOD, The Story of Our Addiction by Mark S. Friedman

"...ours is a culture of energy illiterates." (Paul Roberts, THE END OF OIL)

OIL IN THEIR BLOOD, a superb new historical fiction by Herman K. Trabish, addresses our energy illiteracy by putting the development of our addiction into a story about real people, giving readers a chance to think about how our addiction happened. Trabish's style is fine, straightforward storytelling and he tells his stories through his characters.

The book is the answer an oil family's matriarch gives to an interviewer who asks her to pass judgment on the industry. Like history itself, it is easier to tell stories about the oil industry than to judge it. She and Trabish let readers come to their own conclusions.

She begins by telling the story of her parents in post-Civil War western Pennsylvania, when oil became big business. This part of the story is like a John Ford western and its characters are classic American melodramatic heroes, heroines and villains.

In Part II, the matriarch tells the tragic story of the second generation and reveals how she came to be part of the tales. We see oil become an international commodity, traded on Wall Street and sought from London to Baku to Mesopotamia to Borneo. A baseball subplot compares the growth of the oil business to the growth of baseball, a fascinating reflection of our current president's personal career.

There is an unforgettable image near the center of the story: International oil entrepreneurs talk on a Baku street. This is Trabish at his best, portraying good men doing bad and bad men doing good, all laying plans for wealth and power in the muddy, oily alley of a tiny ancient town in the middle of everywhere. Because Part I was about triumphant American heroes, the tragedy here is entirely unexpected, despite Trabish's repeated allusions to other stories (Casey At The Bat, Hamlet) that do not end well.

In the final section, World War I looms. Baseball takes a back seat to early auto racing and oil-fueled modernity explodes. Love struggles with lust. A cavalry troop collides with an army truck. Here, Trabish has more than tragedy in mind. His lonely, confused young protagonist moves through the horrible destruction of the Romanian oilfields only to suffer worse and worse horrors, until--unexpectedly--he finds something, something a reviewer cannot reveal. Finally, the question of oil must be settled, so the oil industry comes back into the story in a way that is beyond good and bad, beyond melodrama and tragedy.

Along the way, Trabish gives readers a greater awareness of oil and how we became addicted to it. Awareness, Paul Roberts said in THE END OF OIL, "...may be the first tentative step toward building a more sustainable energy economy. Or it may simply mean that when our energy system does begin to fail, and we begin to lose everything that energy once supplied, we won't be so surprised."

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